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Even Vince Cable now admits that his announcement during the party conference that he wants the Lib Dems to adopt a policy of levying a new tax of 0.5% on the value of properties over £1m could have been smoother. His failure to consult shadow cabinet colleagues, let alone the party’s policy committee, dented even Vince’s seemingly unassailable reputation. However, the process muddle is a side issue to the bigger question: is the policy right, and could the party campaign successfully on it?

First, the policy, and here are two alternative, liberal views. Martin Wolf of the Financial Times has declared his firm support for Vince’s plan:

Property taxes are economically desirable, though the best such tax is on site value, rather than on completed development. What makes such taxes attractive is that they bear not on effort, but on “rent” – value over and above the economic costs of production. Income tax, by contrast, bears on successful effort. …

The case for imposing a proportional tax (proposed by Mr Cable at a mere 0.5 per cent) above this sum is, as Mr Cable himself has noted, that “Messrs Mittal and Abramovich in their £30m palaces pay the same as a [top band] family home, though their properties may be worth 40 or 50 times as much.” The top band is unreasonably broad. Only in a country both besotted with property and determined to tax the middle classes, rather than the hugely wealthy, would people object to this obviously just idea. The UK should either impose several further upper bands on the council tax, or a proportional tax within the top band.

Less enamoured of Vince’s proposal is Lib Dem blogger, and land value tax advocate, Jock Coats:

It combines everything we know to be bad about the Council Tax with none of what we promote as good about Land Value Tax. … It seems to me that it is primarily aimed at sating the desire for a particular type of modern liberal to hammer the wealthy in order to “redistribute” to the less well off, rather than to create a genuinely more equitable system in which taxation is transparent, applied as far as possible to everyone of a similar class – ie land owners or income earners and so on.

The greatest benefits of land taxes can only be gained when land taxes are applied to the sort of land that those of us struggling to find a home need to be cheaper – which means taxing all land. If we cannot
show these benefits, and quickly, then the arguments for land taxes will go stale before the benefits are apparent, and this sort of measure will foreshorten that process.

And now let’s turn to the campaigning issue. Here, again, opinion may well be divided. When Vince first floated his ‘mansion tax’ proposal 18 months ago, he was forced to drop it under pressure from colleagues whose concerns included the impact it might have in the eyes of middle-class voters who aspire to live in £1m+ houses. I suspect this concern is over-done. After all, a home-owner in a house worth £1,000,001 would pay just half a penny in ‘mansion tax’ annually.

I was very struck listening to Lord (Michael) Heseltine’s comments on the issue of the ‘mansion tax’ on BBC1’s Question Time on Thursday night. He dismissed the idea as “mad”, and then let his rhetoric run away with him, ridiculing the very notion of property taxes – allowing David Laws to well-and-truly skewer him by pointing out it was Hezza who brought in the Council Tax, the most regressive property tax invented. Lord Heseltine did at least have the grace to look embarrassed. (You can watch the 5-minute exchange on BBC iPlayer here about 35 minutes in).

His attack, though, was the one we could expect to hear from the Tories if we did adopt the ‘mansion tax’ – that it’s a tax which will hit hard those living (I quote Lord Heseltine) “in a modest terrace house on the periphery of central London”. Now I’m not an expert on London property prices, but when I checked out the BBC’s UK house prices webpage from May, it showed the average terraced house price in Greater London to be £352k. In fact there were only two authorities where the price of the average terrace house exceeded £1m – Westminster and Kensington and Chelsea. In a further 30 Greater London authorities, the average terraced house costs less than £1m.

My guess is that the ‘mansion tax’ will likely prove popular among Lib Dem voters, and those thinking of voting for the party. Indeed, the fact that the party’s ratings are up above 20% in the two post-conference polls to date suggests voters did not exactly recoil in horror from the idea (though these are doubtless only temporary surges that will even out as the party conference season progresses).

Such are my thoughts on the ‘mansion tax’ – but what do you, LDV’s readers, think of it all? Here’s the new poll question: